3 Reasons Investors Watch The Trade Desk (TTD)

The Trade Desk’s stock price has taken a beating over the past six months, shedding 20.7% of its value and falling to $53.59 per share. This may have investors wondering how to approach the situation.

Given the weaker price action, is this a buying opportunity for TTD? Find out in our full research report, it’s free.

Why Do Investors Watch The Trade Desk?

Built as an alternative to "walled garden" advertising ecosystems, The Trade Desk (NASDAQ:TTD) provides a cloud-based platform that helps advertisers and agencies plan, manage, and optimize digital advertising campaigns across multiple channels and devices.

Three Positive Attributes:

1. Billings Surge, Boosting Cash On Hand

Billings is a non-GAAP metric that is often called “cash revenue” because it shows how much money the company has collected from customers in a certain period. This is different from revenue, which must be recognized in pieces over the length of a contract.

The Trade Desk’s billings punched in at $3.49 billion in Q2, and over the last four quarters, its year-on-year growth averaged 24.2%. This performance was impressive, indicating robust customer demand. The high level of cash collected from customers also enhances liquidity and provides a solid foundation for future investments and growth.

2. Customer Acquisition Costs Are Recovered in Record Time

The customer acquisition cost (CAC) payback period measures the months a company needs to recoup the money spent on acquiring a new customer. This metric helps assess how quickly a business can break even on its sales and marketing investments.

The Trade Desk is extremely efficient at acquiring new customers, and its CAC payback period checked in at 4.7 months this quarter. The company’s rapid recovery of its customer acquisition costs indicates it has a highly differentiated product offering and a strong brand reputation. These dynamics give The Trade Desk more resources to pursue new product initiatives while maintaining the flexibility to increase its sales and marketing investments.

3. Operating Margin Reveals a Well-Run Organization

While many software businesses point investors to their adjusted profits, which exclude stock-based compensation (SBC), we prefer GAAP operating margin because SBC is a legitimate expense used to attract and retain talent. This metric shows how much revenue remains after accounting for all core expenses – everything from the cost of goods sold to sales and R&D.

The Trade Desk has been a well-oiled machine over the last year. It demonstrated elite profitability for a software business, boasting an average operating margin of 17.7%. This result isn’t surprising as its high gross margin gives it a favorable starting point.

Final Judgment

The Trade Desk possesses several positive attributes. With the recent decline, the stock trades at 8.7× forward price-to-sales (or $53.59 per share). Is now the right time to buy? See for yourself in our in-depth research report, it’s free.

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